Impact of Trump's Executive Orders on Homebuilders

President Donald Trump quickly set his agenda into motion after taking the oath of office on his first day. He signed numerous executive orders, memos, and proclamations that cover a broad array of topics, from halting participation in the World Health Organization to postponing the ban on TikTok.

Among these actions, several have significant implications for homebuilders. His commitment to address immigration and the looming threat of tariffs on Canadian and Mexican goods are now becoming a reality, with one executive order specifically focusing on housing.

The National Association of Homebuilders (NAHB) expressed support for the housing-related order.

“NAHB applauds President Trump for making housing a priority from day one by issuing an order aimed at reducing costs and boosting housing supply,” the organization stated. “President Trump recognizes the housing affordability crisis in America and understands that alleviating this crisis requires the removal of unnecessary regulations that inflate housing costs and hinder builders from creating affordable homes.”

While the specific effects of these executive orders on homebuilders remain uncertain and occasionally contradictory, it is evident that many of Trump's initiatives could pose immediate challenges for them.

“It’s not just about tariffs,” remarked Bright MLS Chief Economist Lisa Sturtevant. “Homebuilders are grappling with a high-interest rate environment, which makes borrowing more expensive. Additionally, sourcing labor and materials is costly, which ultimately raises the price of homes.”

Analyzing Trump's Housing Executive Order

Homebuilders appreciate Trump’s acknowledgment that limited housing supply is driving prices up, yet the way to address this issue in his executive order is unclear. Most of the text critiques the Biden administration and its policies as “oppressive.” From what can be discerned, Trump aims to weaken regulations that restrict homebuilding.

However, many regulations affecting housing, such as zoning laws, are determined at the local level, outside the president's jurisdiction. Federal policy can only encourage changes at the local level through conditions on federal funding, such as transportation grants, but some local areas may decline that funding to maintain existing zoning laws.

“He has tasked federal agency heads with examining this, but the real impact might be limited to incentivizing local governments to ease regulations for housing construction,” explained Chen Zhao, head of economics research at Redfin.

The Effects of Immigration Orders on Builders

Trump's immigration executive orders primarily focus on the southern border, modifying asylum policies, and securing federal funding for the border wall. While these may not immediately affect builders, they signal a tougher stance on immigration.

If Trump proceeds with mass deportations of immigrants already in the U.S., this could significantly reduce the labor pool available for construction. According to NAHB, approximately 32.5% of construction workers are immigrants, a figure that is higher for specialized roles. For instance, immigrants make up over 60% of plasterers and drywall installers.

“Challenges in recruiting enough workers are evident in the construction sector,” Sturtevant noted. “In the long run, a restrictive immigration environment could negatively impact both the economy and the housing market.”

The effects of potential raids in immigrant communities on homebuilders largely depend on their locations. Although there was a plan to conduct raids in Chicago, this plan leaked before Trump took office and is now uncertain.

Previously, Trump targeted “sanctuary cities” for raids, including large urban centers like New York and Los Angeles, which have slower home construction rates compared to regions in the southern U.S. If raids are limited to these cities, builders may not experience a labor shortage as severely.

Conversely, the Los Angeles area, which has experienced significant housing demand due to wildfires, continues to see construction activity. This scenario complicates the potential impacts of immigration policies on future labor supply as well.

Tariffs on Canada, Mexico, and China

The potential imposition of tariffs is complex, with fluctuating numbers regarding Canada, Mexico, and China. Economists generally agree that these tariffs could lead to increased home prices. A 2018 NAHB analysis suggested that Trump's earlier tariffs on Canadian lumber added around $9,000 to the cost of building a typical single-family home.

Sturtevant highlighted that raising material costs for homebuilders will complicate construction and make homes less affordable for buyers. For builders against these tariffs, some of Trump’s actions may provide relief. He proposed a 25% tariff on Canadian and Mexican imports with a launch date of February 1, which some may view as a bargaining strategy.

While Trump had initially promised harsh tariffs on China, he opted for a more measured approach, calling for a “study” of trade issues with the country on Inauguration Day.

In contrast to immigration policies, tariffs would directly influence the cost of building materials. A significant portion of U.S. construction lumber stems from Canada, along with substantial steel supplies. Furthermore, China is a major supplier of home appliances, and the pandemic clearly demonstrated the vulnerabilities in these supply chains.

Although tariffs might encourage increased domestic production of certain materials over time, the short-term impacts are likely to create challenges for builders. It will be difficult for them to adjust their supply chains quickly, indicating that there may be an initial pain point.

Trump, Housing, Homebuilders